Khatija Haque - Head of MENA Research
Published Date: 10 July 2017
The Emirates NBD Dubai Economy Tracker Index (DETI) increased to 56.5 in June from 55.0 in May on faster output and new orders growth. However, employment remained broadly unchanged at 50.2, the lowest reading since February this year. On average, firms in Dubai cut selling prices in June, even though input costs rose slightly. However, this was largely driven by discounts in the travel & tourism and to a lesser extent the wholesale & retail trade sectors, while firms in the construction sector were able to increase selling prices marginally last month. Businesses surveyed remained optimistic about their prospects over the coming year, although the degree of optimism eased from May, to the lowest reading in 11 months.
Of the three key sectors surveyed, wholesale & retail trade was the outperformer in June, with this sector index rising to 58.0 from 55.5 in May. The sector was likely buoyed by spending over Ramadan and the Eid holidays, which fell in June this year. The construction sector index also rose last month reflecting increased output on the back of new projects. Business conditions in the travel & tourism sector improved again in June, but at a slower rate than both construction and wholesale & retail trade sectors.
The wholesale & retail trade sector index rose to 58.0 in June, the highest reading since February this year. Output and new orders surged, most likely on the back of higher spending over Ramadan and the Eid holidays. However, firms in the sector continued to cut selling prices in June, in order to support demand and compete for custom. Despite the very strong rise in activity and new work, employment in the sector was broadly unchanged (at 50.5), slower than the job growth seen in April and May. Input costs increased at a faster rate in June, putting further pressure on margins in the sector.
Firms remained optimistic overall, although the degree of optimism declined from May. However, stocks of purchases (inventories) rose at the fastest rate on record as businesses anticipated continued strong demand in the coming weeks.
The construction sector index rose to 57.4 in June from 56.2 in May as both output and new work growth accelerated sharply last month. Firms attributed the rise in output to more projects, although they also noted that improved client demand was supported by “promotional activities”. On average however, selling prices in the construction sector were slightly higher than in May last month, with this sub-index rising to 50.5 from 50.1 in May. Price discounting had been substantial in January through April.
Despite the rise in output and new work, employment in the construction sector declined in June, with this sub-index falling to 48.4 from 51.1 in May. Firms were also somewhat less optimistic about the coming 12 months than they were in May, although the overall degree of business optimism remained high at 67.2.
The travel & tourism sector index rose slightly to 54.4 in June from 54.2 in May. Output increased at a faster rate in June, while new work growth eased slightly. Firms in the sector cut selling prices by the most since October 2016, as they headed into what is traditionally the low season for tourism. Employment declined marginally in June. Firms remain highly optimistic about their prospects over the coming year however, with the business expectations index at 74.3 in June, down from 79.8 in May.
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